1. Govt vide notification no 56/2019-Central Tax dated 14th November, 2019 makes amendment in Central Goods and Services Tax Rules, 2019 (seventh amendment). This amendment in rules seeks to simplification in Annual Return (GSTR 9) and Reconciliation Statement (GSTR 9C).
2. Through this article, we will focus on the some of the aspects of GSTR 9 and GSTR-9C simplifications which may not be a real simplification in a practical scenario. Though there are some welcome changes made by the government like uploading signed PDF of GSTR 2A, option to provide details in Table No 15 of GSTR 9, option to not to bifurcate ITC into Inputs, Input Services, Capital Goods in GSTR 9, done away with HSN wise requirement in GSTR 9 but in GSTR 9C there seems no relaxations to the auditors except true and fair view from true and correct view of GSTR 9C details.
3. Let us see the changes made through this notification which may not help anyone.
Simplification in GSTR 9 and its impact on actual workings:
♦ Option to show supply separately under nil rated/exempted/Non-GST Supply. Taxpayer can show the same in one row only.
Though this will help the taxpayers to show consolidated amounts in one column but still exercise needs to be carried out by the taxpayers for Rule 42 & 43 calculation for exempted as well as nil rated supply with reference to Input Tax Credit Reversal.
♦ Option to show credit notes/Debit Notes/amendments related to above supplies (exempted/nil rated/non-GST supply) details separately:
This is a welcome change, and will help in reducing the compliance work of extracting the unnecessary details.
♦ Option to show bifurcation of Input Tax Credit in Input Goods/Input Services/Capital Goods:
This is also a welcome simplification. As providing bifurcation of ITC into Inputs, Services and Capital Goods was not going to serve any purpose.
♦ Option to show ITC Reversal on account of Rule 37,39,42 43 and Section 17(5)
Though this will reduce the chances of misreporting but still taxpayers need to workout the specific details like credit reversed due to non-payment to creditors within 180 days (Rule 37), reversal of ITC due to exempt/nil rated supply (Rule 42 & 43) and ineligible credit reversed (Sec 17-5) for any kind of department audit or audit by chartered accountant/cost accountant.
Simplification in GSTR 9C and its impact on actual workings:
♦ Option to show adjustment related to turnover to travel from the turnover as per Audited Financial Statement to the Turnover as per Annual Return:
As per the changes made, now taxpayers are not supposed to show details of adjustment in turnover like, turnover from April to June 17, deemed supply, section 15 adjustment, adjustment due to foreign exchange fluctuations, financial credit notes, unbilled revenue etc.
This simplification is not practically feasible as this reconciliation statement is verified by the Auditor and to carry out the adjustment from turnover as per audited P & L to turnover as per GSTR 9, auditor has to find out the reason for adjustments.
Without specific reason for adjustment, auditor cannot directly report the difference in Table 5O. So, auditor has to carry out the exercise to identify the deemed supply, April to June Turnover, Financial Credit Notes, unbilled revenue etc. to arrive at the correct turnover which attracts GST. So, this simplification will not help in extracting the details.
♦ Option to Show details in Table No 12 relating to ITC to be claimed/claimed in different Years:
As an auditor, he/she must have carried out the exercise with reference to the ITC of FY 2017-18 claimed in FY 2018-19 as this must have led to difference in closing balance as per Books and closing balance as per GSTN Portal i.e. Electronic Credit Ledger. So, in order to reconcile the ITC of GSTR 9 and Audited Financial Statement, Auditors have to extract the said details and the extracting the same is useful for his/her working and safeguarding his/her interest.
Also, through this notification, taxpayers have option to show ITC booked in earlier financial years claimed in current financial years (2017-18). Though this being the first year of GST audit, no amounts shall be appeared here but as per the notification which notifies GSTR 9C, amounts as appearing in Tran 1 shall be declared here. So, this row was not leading to any kind of exercise for auditors. So, here simplification was not needed.
Probably clarifying that whether the auditors are liable to verify the eligibility of the amount claimed in Tran 1 may help the auditors to plan audit and reporting accordingly.
♦ Table 14 – Expense Wise ITC made optional:
Logic behind this simplification may help the tax payers who have not availed any kind of ineligible ITC as they will be relieved from doing unnecessary exercise. However, let us take an example that tax payer has availed credit on Rent a Cab during the year amounting to Rs. 1 Lakh and the same was not reversed during the Tax Audit/Statutory Audit due to oversight. Now, during GST audit, the said credit was observed.
So, in table 12 auditor is just supposed to reconcile the ITC as per Audited FS and Annual Return. So, in our above case, there will be no difference in ITC. However, now the questions arise is how to reverse the said credit being Table No 14 made optional?
So, exercise has to be carried out to do expense wise ITC bifurcation if there is a reversal of ineligible ITC identified during the course of GST Audit.
So, though taxpayers might be benefited from some welcome changes made in GSTR 9 but simplification made in GSTR 9C may not help anyone and unwelcome one.
Auditor and tax payers has to carry out the exercise in reconciliation statement. Any kind of simplification in GSTR 9C may not help in reducing the compliance efforts of the businessman unless substitute of monthly returns kept in practice by the government. May be introducing TDS on each taxable transaction, advance tax payment by the taxpayers i.e. applying the same analogy of Income Tax may help the business to reduce the compliance efforts to the great extent.
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Very informative and to the point article